When I worked in Retail Buying between 2001 and 2013, we worked hard to secure, and harder to keep customers.
Retailers knew that loyalty was something that you needed to keep investing in, you needed to convince customers that you were there for them, that you were working for them, that they were your sole focus that the relationship was personal. In the main, retailers did that. They sold an ever-increasing range in store to satisfy every customer need and appealed to an increasingly broad demographic. They offered strong promotions to try and persuade customers to spend a little more when they went shopping and made the experience increasingly convenient and labour-saving.
Retailers also increased the number of services they offered the customer, to try and spread the retail magic into other areas of the consumers’ world so that the customer bought into your business for a variety of other needs that included banking, insurance, pharmacies, doctors and opticians.
In this period (and up to the end of 2021) customers were generally loyal, not simply because they chose to be, but also because, by satisfying so many everyday needs for them, it felt like the loyalty was reciprocated. They were loyal to the retailer by trusting the brand and buying more, and the retailer was loyal to them by offering an increasing number of ways to get the same retail experience. Yes, there was an increasing competition which ensured you kept the customer first, but loyalty through this period was based on growth and it was measurable. Growing the LFL, growing market share, growing the consumer shopping basket, shopping more frequently and increasing the number of ways customers bought from you. For most of this period, inflation was at a historic low, however, is loyalty still relevant in a highly inflationary economy when customers are looking for ways to spread their fixed budget as far as possible?
I would suggest that loyalty is more relevant and precious now than it’s ever been. This is because this is when the customer relationship with the retailer is being most tested. Loyalty is gained over a long period but can be lost quickly. For many customers, the need is now simpler: “Help me make my money go further. Look after me. Make me feel as important now when I’m struggling as you did when I had more money to spend with you.” For the customer, the loyalty model is strained through a sharp economic reality and a clear-eyed view of what needs to be done: “Where can I get the best value for money? Can I afford to shop here? Is this retailer looking after my interests?” Customers are not naïve, and many understand the wider economic challenges business is facing, however, they will also remember who was loyal to them and looked after their best interests through the difficult times as they did during more positive times.
Is loyalty dead? No, I think it’s still there to be secured, but the investment required to do so is not the same as it was over the last 20 years. Businesses that do well in this period and secure their future prosperity, will be those that looked after customers when times were tough.
To find out how we can help you and your organisation retain loyalty through reduced costs and better pricing, please contact Gavin Bowen-Ashwin, Managing Partner and Head of Consumer at 4C Associates.